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What Are the Most Important Contract Terms for Tech Companies?

Technology companies, especially those with active websites or e-retail portals, will want to have a well-drafted set of contracts in place to keep their business running smoothly from a legal perspective. These contracts cover a variety of topics: terms of use and privacy policy for the website, sales and licensing contracts with vendors and suppliers, partnership or company agreements among the founders, and employment or contractor agreements, and more. Tech companies can look to a few specific contract terms that are important in common industry agreements.

First, all of the above types of contracts need a section dealing with intellectual property (IP) rights. The terms of use agreement should specify if or how website users can use content from the website and whether they need to ask for the company’s permission to do so.. The sales and licensing contracts should lay out use of company materials by the other businesses. The founder and employment agreements should specify whether founders or employees can use IP in other ventures or take IP from the company during or after the company’s operation.

Second, all of the above types of contracts need contract breach and dispute resolution clauses, preferably with a choice of law and venue for any disputes. Tech companies go out of business, employees and founders leave, and suppliers break contracts. Your company needs a plan for when (not if) this happens and how the dispute will be resolved. For example, a breach clause could specify that if a supplier is more than 12 hours late with a planned delivery without notice to the company, the company will first contact the supplier to resolve the dispute within 24 hours of the planned delivery, and if the supplies are not delivered within 24 hours of the company’s contact, the supplier will be deemed to be in material breach of the contract. There may also be a clause describing a discount or penalty on late shipments. Then the contract could include a dispute resolution clause stating that a party seeking to remedy a material breach of the contract could initiate arbitration in San Diego County, California, under California law. This is just one example of the myriad types of breach and resolution clauses that can be tailored to suit your business.

Third, limit your liability as much as possible by including disclaimers, limiting representations and warranties, and spelling out everything in the contract as plainly and clearly as possible. For example, a tech company’s customers might not be satisfied with a representation about the product’s battery life as stated on a website. Your website should have a disclaimer to hedge against complaints. Other business contracts should address similar potential problems, such as disgruntled employees. A protective contract for a technology company will anticipate these kinds of problems, attempt to prevent them, and have a way to fix them if possible.

An experienced business attorney like Michael Leonard, Esq. of San Diego Corporate Law can help you draft agreements that protect your technology company. named a “Rising Star” for 2017 by SuperLawyers and has the experience and the insight to anticipate common tech industry issues or prevent them before they arise. To schedule a consultation, e-mail San Diego Corporate Law or call Mr. Leonard at (858) 483-9200.

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